Forget the statistics: Are you winning or losing the game?

One of these key analytical tools that is often underused or misunderstood in business is the financial statement.  But, it is, in fact, the ultimate scorecard. Reportedly, 50% or more of mid- to senior managers do not have an appropriate understating of the integrated workings of a standard set of financial statements. Think about the significance of this finding—business failure can be directly linked to a company that doesn’t educate its employees on how to take an active role in maintaining financial health.  

The CFO and his or her finance department are typically considered by the rest of the company as living on their own island.  While they are regarded as having a specific and important expertise, even a dynamic CFO can be frustrated by not being able to get the rest of the company to understand and follow business fundamentals that bring forth good financial performance throughout the organization.

So where is the constraint?  Is it in the process or content?  The truth is, it is probably both.



Most managers who review financial statements have one common objective...to easily understand what the numbers are saying.

According to Andre Gien of Global Financial Bridge, “financial statements are not designed with the customer or reader in mind, so we take a company’s income statement and balance sheet and convert them into a format that provides a one-page scorecard.”

Gien noted that this approach provides a tool to answer the following questions:

• What is the impact of different price strategies on profit, cash and working capital?
• What is the impact of a large new customer on profit cash and working capital?
• If we reduce our inventory portfolio how could this impact profit cash and return on investment?
• How will an additional sales person impact profit cash and working capital?
• What is the impact of reducing inventory by 10 days holding?
• Are our current strategies producing a cash absorbing business if we grow?
• What was the impact of improving our margins and reducing our revenue?
• Do we need to focus on how we manage our income statement or our balance sheet?
• If we want to achieve an operational cash flow of $xxxx what amount of sales do we need?
• What will our future profit, cash and balance sheet look like if we can execute on our plan?

“Having the ability to measure the outcome of your answers to these questions can produce a real competitive advantage, allowing for decisions to be made on evidence as opposed to intuition,” said Gien.

The scorecard is interactive, allowing you to do "what ifs" on key financial performance, and allows for a comparison of different scenarios.  A company can measure potential actions and their impact on cash flow, profit and return on investment.   In effect, the use of such technology can provide the ability to road test financial decisions before they’re made.

For those of you who want your scorecard presented to you please contact Steve STravis@travisconsulting.com for your personalized view of your business performance .